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Arizona: For-Profit College Paradise?

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Huffington Post

Thursday, March 10, 2016

David Halperin

As government regulators and law enforcement agencies in Washington and around the country have come to recognize that some of the biggest for-profit colleges have been deceiving and abusing students, and as media reports have exposed these abuses, and as many students have started to look elsewhere for their educations, at least one State -- Arizona -- seems to remain firmly in the political clutches of for-profit schools.

Arizona is not just the site of the only NFL stadium who naming rights are purchased by a for-profit college. It's also where for-profit colleges, backed by sympathetic legislators, some of whom take their campaign contributions, still seem to get their way, sometimes despite the interests of students, and the interests of justice. Much of this power and influence is wielded by two institutions: (1) the nation's biggest for-profit college, the University of Phoenix, whose name is on the Glendale, Arizona, football stadium, and which received more than $2 billion last year in federal taxpayer dollars for student grants and loans; and (2) the Christian-oriented for-profit Grand Canyon University, which last year received more than $720 million in taxpayer funds.

Two weeks ago, the Arizona state Senate approved, by a 16-14 vote, a bill that would lower the state property tax on the state's accredited for-profit colleges from 18.5 percent to 5 percent. Grand Canyon has lobbied for the bill, while the University of Phoenix says it has no position on the legislation. A bill in the previous legislative session that would have benefited only Grand Canyon was set aside because of concerns about its constitutionality.

This tax break for for-profit colleges could cost Arizona $2.6 million a year, according to a legislative analysis; but Grand Canyon president Brian Mueller has already said the amendment would cut $2.9 million from his school's tax bill alone. Local officials and activists in Arizona explain that the tax cut for for-profit colleges would shift more of the tax burden to homeowners, some in low-income communities.

Opponents have questioned why for-profit colleges would be singled out for this tax break. "If you're a business in Arizona you belong .... with all the rest of the businesses," Arizona Tax Research Association President Kevin McCarthy told the Arizona Republic. "And you shouldn't get [a break] because you've got a good lobbyist."

The lead sponsor of the state senate bill was Senator Steve Yarbrough. Since 1998, Yarbrough has been, according to his webpage, "the Executive Director of the Arizona Christian School Tuition Organization, a 501 (c)(3) charitable organization, that has provided scholarships to thousands of Arizona students to attend the school of their parent's choice."

Arizona Senate President Andy Biggs (R) was another aggressive sponsor of the bill; just days after the bill passed, Biggs announced he is running for a U.S. House of Representatives seat. The bill will be considered on Thursday by a committee of the Arizona House, whose speaker, Rep. David Gowan (R), also is running for Congress.

The special tax break that Arizona legislators want to bestow on Grand Canyon comes as the company's private accrediting agency, the Higher Learning Commission, just rejected Grand Canyon's proposal that it would convert the school to a non-profit while keeping much of the school's revenue in a for-profit entity. While some accreditors have long been docile in the face of for-profit college abuses, they are now starting to realize that such passivity will no longer play in a world where government overseers, such as Senator Elizabeth Warren (D-MA), are increasingly paying attention. Grand Canyon's audacious proposal to become the latest "covert for-profit" offended the sensibilities of the accreditor, but its proposal to get better tax treatment than other corporations apparently is just fine with top Arizona legislators.

2. The University of Arizona president has joined the board of a big for-profit college

On February 22, DeVry Education Group announced that Ann Weaver Hart, president of the University of Arizona, and Linda Katehi, Chancellor of the University of California-Davis, had joined its board of directors. Eight days later, Katehi abruptly resigned, having faced withering criticism from a California state assemblyman and public interest advocates.

The Federal Trade Commission sued for-profit DeVry University in January for alleged deceptive advertising. The company also has been under investigation by the U.S. Department of Education and the attorneys general of Illinois, Massachusetts, and New York. DeVry last year received $1.47 billion in taxpayer dollars from federal student grants and loans.

The company pays board members $70,000 a year, plus stock worth about $100,000.

Hart, who heads one of the state's two flagship universities, is refusing to join Katehi in quitting the DeVry board. Instead, she said, "I will remain on the board for the same reasons I accepted the appointment -- I believe my experience helping public university students achieve their academic goals will benefit DeVry's students."

That Hart is able to keep her DeVry post while Katehi quickly resigned suggests, again, the influence of for-profit schools on Arizona politics.

3. Arizona's U.S. Senators, McCain and Flake, pressured the Pentagon to back off a probe of the University of Phoenix

Last October, Arizona's senior U.S. senator, John McCain (R), the chairman of the Senate Armed Services Committee, made a blatant public push to get the U.S. Department of Defense to back off an investigation of the University of Phoenix, which was charged with improper recruiting practices aimed at military service members. McCain went as far as to charge that fellow Senator Dick Durbin (D-IL) was behind the Pentagon probe and had "orchestrated" a "shameful ... vendetta against for-profit universities." McCain upped the ante by asserting that Durbin has a "well-known record of not supporting the men and women who are serving in the military." Alleging a larger conspiracy, McCain repeated accusations in a recent Wall Street Journal editorial that "the Obama Administration's military tribunal is punishing" the biggest for-profit college, the University of Phoenix "for being a target of the political left" and that "General Durbin has commanded the Education Department and Department of Veterans Affairs to 'take appropriate action' against the company. Bombs away."

In fact, it was McCain, by using his power as Armed Services chairman to pressure the Pentagon to back off a legitimate investigation of the University of Phoenix, who disserved service members and veterans; they deserve to be protected against deceptive recruiting, poor quality programs, and other predatory practices.

Paul Rieckhoff, founder and CEO of Iraq and Afghanistan Veterans of America, has said that the University of Phoenix was the "worst by far" for-profit college in terms of taking advantage of the vets who are members of his organization. A letter sent last fall to Secretary of Defense Carter from a coalition of organizations (in which I participate), signed by more than thirty groups, including the Air Force Sergeants Association, the Association of the U.S. Navy, Blue Star Families, Iraq and Afghanistan Veterans of America, Paralyzed Veterans of America, Student Veterans of America, Veterans Education Success, Veterans for Common Sense, Veterans Student Loan Relief Fund, VetJobs, VetsFirst, and Vietnam Veterans of America, as well as the Leadership Conference on Civil and Human Rights, League of United Latin American Citizens, and many others, supported the Pentagon's investigation of the University of Phoenix and cited, as support, the complaints of hundreds service members and veterans "who experienced deceptive recruiting" by the University of Phoenix.

Four state attorneys general, Democrats and Republicans, along with the Department of Education, the CFPB, the Securities and Exchange Commission, and the Federal Trade Commission, as well as the Pentagon, were all already investigating or sued Phoenix for fraud and other misconduct.

But McCain sent a letter, co-signed by Arizona's junior senator, Jeff Flake (R), and Senate education committee chairman Lamar Alexander (R-TN), demanding that the Pentagon provide a trove of answers and documents justifying its action. McCain, Flake and Alexander all have received significant campaign contributions from executives of Apollo Education Group, the University of Phoenix's parent company. Indeed, the company is the largest donor in the 2016 election cycle to both Flake and Alexander. Apollo also pays an army of DC lobbyists to work its will in Washington.

On January 15, after intensive pressure by McCain and by lawyers for the University of Phoenix, the Pentagon did indeed back down, lifting a temporary ban on the company recuriting on military bases and getting tuition assistance for troops, while keeping it on tighter monitoring for two years. McCain praised the decision.